HA NOI — The Electricity of Viet Nam (EVN) has proposed a price increase on electricity consumption by steel and cement industries.

According to the Ministry of Industry and Trade (MoIT), it cost the power sector about VND2.547 trillion (US$121.3 million) to provide cheap power to the steel and cement sectors in 2010 alone. Foreign invested steel manufacturers enjoyed about VND506 billion of this sum.

During the same year, steel and cement industries consumed about 11 per cent of the country's total electricity output, accounting for 982 million KWh. They paid just VND914 per KWh which actually cost VND1,180 per KWh to produce.

Last year, the EVN increased electricity prices twice for a total 20 per cent hike, bringing the average price to VND1,304 per KWh. Households were charged VND1,400 per KWh.

An official of the Electricity Regulatory Authority of Viet Nam under the MoIT said households paid higher rates than production sectors because they had the priority for electricity use.

He said if power prices for steelmakers remained cheap, the steel industry would export more. Therefore, a possible halt in steel exports might be considered in order to curb losses incurred from such cheap electricity.

On the Construction Ministry's website, Nguyen Tien Nghi, vice chairman of the Viet Nam Steel Association (VSA) said the hike was unfair for the steel industry, citing that electricity costs accounted for only 0.7 and 5 per cent of the production costs in laminating steel and producing pig iron, respectively. This meant that electricity costs were not the most important proportion in calculating steel production costs.

A sufficient supply of electricity to meet the steel industry's demands was critical and it was agreed that electricity prices should follow the market mechanism, he said.

Nghi also said the steel industry played a key role in the construction and real estate sectors, yet as the real estate market had been sluggish, an increase in electricity prices for the steel industry alone was unacceptable. If required, the price hike should be applied to all sectors, not only steelmakers, he said.

Industry insiders and several steelmakers voiced their concerns about a possible halt in steel product exports, saying that such a halt would not result in a significant power savings.

They said that while the export volume was insignificant, the halt would result in more difficulties for the steel manufacturers as the supply was currently double the demand.

Meanwhile, stockpiled steel will meet domestic market needs for the next few months.

Exporting steel products was considered the best way for the steel industry to avoid stockpiling, they said.

The VSA has called for incentives from the Government to help steel manufacturers sell their products while reducing the trade deficit. — VNS